Question

suppose a savings and loan pays a nominal rate of 1.4% on savings deposits. find the effective annual yield if interest is compounded annually. (round to the nearest thousandth as needed)

Answer 1

The effective annual yield is 7,044%

Step-by-step explanation:

The effective annual yield is given by the formula:

`(i+(i)/(n))^n-1`

Where i is the nominal interest rate. i = 1.4% = 0.014

n is the number of time compounded annually. n = 1

Using these, we have

`\begin{gathered} (0.014+(1)/(0.014))^1-1 \\ \\ =70.44 \end{gathered}`